Tag Archives: Jim Pattison Broadcast Group

CRTC approves sale of radio stations without public process

Less than a week before Christmas, the CRTC approved the sale of two FM radio stations in Winnipeg and one in Calgary without giving the public any opportunity to comment on it.

The stations were sold by Bell as part of the divestments it was required to make in the Astral acquisition. Because adding the Astral stations put Bell over the limits set by CRTC policy in major markets, it was required to sell 10 stations to someone else. Bell came to agreements to sell two stations in Ottawa to Corus, two stations in Toronto and three in Vancouver to Newcap, and two stations in Winnipeg and one in Calgary to the Jim Pattison Broadcast Group.

Specifically, Pattison was getting:

The list of stations that were sold, which includes a mix of Bell and Astral stations, was never discussed during the second public hearing into the Astral acquisition, despite the fact that the decision the first time around criticized the list because it appeared Bell was keeping the best-performing stations and selling the worst-performing ones (instead of, say, just selling all the Astral stations they couldn’t acquire).

Bell countered that there were reasons other than ratings for its decisions of which stations to sell, and that some of the stations it was selling had high ratings. But the details of the reasoning behind the selling of those stations was submitted confidentially to the CRTC, and so we don’t know what they are.

The divestments require their own process, since they are not automatically approved in the Astral decision. The Corus sale was discussed at a hearing in November (along with its acquisition of Teletoon, Séries+ and Historia, which have since been approved.) And the sale to Newcap has been made part of a public process though no hearing has been scheduled.

But as I explain in this story on Cartt.ca (subscription required), the CRTC approved the Pattison acquisition, valued at almost $30 million, without opening it up to public comment.

The CRTC can issue decisions on an administrative basis for things that it doesn’t believe require public input. It even has a policy for such decisions. For example, if there’s an intra-corporate reorganization, or if the owner dies and control of the station gets passed along to a family member, there doesn’t need to be a public process. An acquisition of a radio station can also be approved without public process if the CRTC believes it doesn’t bring up any policy issues and the value of each station is under $15 million.

Because the acquisition wouldn’t put Pattison over the common ownership limit in either market, the CRTC apparently felt there was no policy issue here. (Of course, the CRTC tends to decide whether there’s a contentious issue by looking at the interventions filed during the comment phase of a proceeding, which it has short-circuited here.)

As for the money part, the Calgary station was actually sold for $16.5 million, which is above the limit. So why not a public process? I asked the CRTC, and here was its response:

In its determination to process this application using the administrative route, the Commission agreed that the value of one of the three stations was slightly over the $15M threshold, but also considered the fact that the value of the other stations involved in the same transaction was well below the $15M threshold (i.e. 3.5M and 5.5 respectively).

The Commission considered that the transaction did not present any policy concerns related to concentration of ownership, cross-media ownership, or diversity of voices. In addition, the Commission accepted the tangible benefits proposed would make a contribution to the enhancement of the Canadian Broadcasting System. Therefore, the Commission concluded that the transaction was in the public interest.

I understand that some non-controversial proceedings should be expedited and that the bureaucratic process can get cumbersome at times. But this transaction, even though it’s within CRTC policy and likely would have been approved, could bring up many policy issues. For example, is the tangible benefits package that Pattison has proposed appropriate? (It has proposed a standard package worth 6% of the transaction price, so one would suppose the answer is “yes”.)

This isn’t a minor share transfer. The application file contains 33 documents. Both the seller (Bell) and the buyer (Pattison) are large broadcasters (Pattison owns dozens of radio stations), and the stations being sold are in large markets. In 2012, the CRTC sought applications for new radio stations in Calgary and got 11 applications, of which it only approved two (one of which was by Pattison).

What’s perhaps most baffling about this situation is that the decision itself is not posted online. Pattison announced the decision by press release on Dec. 20, and on Jan. 4 the CRTC posted the application with a note saying it was approved.

I had to request the actual decision letter, which was scanned and sent to me. (You can read it here as a PDF.) It includes information that is not posted elsewhere online, such as the actual value the CRTC set for the transaction.

Pattison had set it at $26.5 million, which included the $25.5 million purchase price and a little over $1 million in assumed leases. But the CRTC decision increased the value of those leases (taking their value over five years), and added costs of working capital and cash (Pattison had argued that Bell would keep any cash the stations had when the deal closes, but CRTC policy is to establish value when the deal is made, not when it closes), as well as $90,000 for two trademarks owned by Kool FM. The total price was established as $29.8 million.

This is significant because the value of tangible benefits (money to help the broadcasting system that the CRTC imposes as a tax on any acquisition of a licence) is proportional to the value of the transaction. The higher purchase price means this package, which is made up of contributions to Canadian music funds, the Community Radio Fund of Canada and other initiatives that help develop Canadian content, goes up by $200,000.

It’s the kind of thing you’d expect people should be given a chance to comment about.

I’ve updated my media ownership chart with this approval.

V to buy MusiquePlus and MusiMax, the last of the Bell-Astral castoffs

The announcement Tuesday from both Bell Media and V that the latter has won the bidding to purchase music specialty channels MusiquePlus and MusiMax means that all of the assets that the CRTC forced Bell to get rid of as a condition of the Astral acquisition now have prospective new owners.

Neither company revealed the amount of the sale, but we’ll know it when the matter comes before the CRTC. La Presse reports it’s $15 million total, which is low for a well-known specialty channel (much less two), and well below the price it was evaluated at when Astral acquired CHUM’s 50% share of the channel for $34 million in 2007.

To recap, here’s what is being sold, and the status of those sales:

To Corus Entertainment:

  • 50% interest in Teletoon (includes four Teletoon channels and Cartoon Network Canada), for $249 million total (Corus already owns the other half)
  • 50% interest in Historia and Séries+, for $138.6 million total (Corus is also acquiring Shaw’s 50% interest for the same amount)
  • CKQB-FM Ottawa (106.9 The Bear) for $10 million
  • CJOT-FM Ottawa (Boom 99.7) for $3 million

All of the acquisitions listed above (with a total purchase price of $400.6 million) were dealt with at a CRTC hearing that began Nov. 5. We are now awaiting a decision. The acquisitions were approved in December and January.

To Jim Pattison Broadcast Group:

These acquisitions were announced on May 16. The purchase price is unknown. The CRTC has not yet set a hearing date for this acquisition. UPDATE (Jan. 15): The total purchase price is $25.5 million (but valued by the CRTC at $29.8 million). The transaction was approved without a public process.

To Newcap Radio:

These acquisitions, total price of $112 million, were announced on Aug. 26. The CRTC has not yet set a hearing date for this acquisition.

To DHX Media:

These acquisitions were announced on Nov. 28. The CRTC has not yet set a hearing date for this acquisition.

To V Media:

  • MusiquePlus Inc. (MusiquePlus and MusiMax). Price unknown (La Presse reports $15 million).

The CRTC has not yet set a hearing date for this acquisition.

V, turnaround artist

It’s been a bit over five years since a company effectively owned 50% each by Maxime and Julien Rémillard got CRTC approval to take over the bankrupt TQS network. Thanks in part to a successful reboot that banked on a counter-programming strategy, and in part to getting the CRTC to agree to virtual elimination of its news department, the Rémillards got the network that has never made money to finally make some money.

The road hasn’t been easy, though. As competitors like Bell Media, Quebecor Media, Radio-Canada and others can make liberal use of other sources of funding, V had only advertising revenue to go on. It had no money-making specialty channels or lucrative cable distribution networks.

Remstar does have licences for three unlaunched specialty channels:

Each of these has four years (so until 2015) to launch before their licences are taken away.

It also had a licence for a user-generated-content channel, which has since expired because it never launched.

Launching new specialty channels is difficult for various reasons, but a big one is that you need to get carriage. And unless you own a cable provider, that can be an uphill battle.

Getting control of MusiquePlus and MusiMax means V doesn’t have to go through that process. MusiquePlus already has 2.4 million subscribers. MusiMax has 1.9 million. They’ll already have the audience. It’ll just be a question of turning that into profits.

Unlike most popular specialty channels, MusiquePlus and MusiMax are not highly profitable. MusiMax has been hovering around the break-even mark, and MusiquePlus has lost more than $5 million since 2009. (This is probably why Bell decided to let them go.)

Media critics blame this unprofitability on the channels having lost their way. There’s no music on MusiquePlus, they complain, but rather a series of reality shows about pregnant teenagers, models, carswashed-up celebrities, people who are famous for being famous and whatever Criss Angel is.

Sure, there’s Rajotte, but MusiquePlus has a long way to go to make itself a music channel again. On the bright side, V has already shown that it can revitalize a television channel and keep it young at heart. If it can do the same with these channels, while also keeping them tied to their raison d’être — music — then they should be able to win a lot of fans, and hopefully make a good amount of money too.